A cash advance is a short-term loan that allows you to withdraw cash by borrowing against your credit card’s available credit line. Instead of making purchases, you access cash directly, typically at an ATM, bank, or by using convenience checks provided by the card issuer
. Key points about cash advances include:
- They usually have a lower limit than your total credit card limit (e.g., if your credit limit is $5,000, your cash advance limit might be $1,000)
- Cash advances incur fees, often ranging from 3% to 5% of the amount withdrawn
- Interest rates on cash advances are higher than those on regular purchases, and interest starts accruing immediately with no grace period
- Payments you make on your credit card may be applied to lower-interest balances first, meaning cash advance balances can accrue interest for longer if you only pay the minimum
- Other transactions like balance transfers, money orders, or buying cash substitutes (gift cards, foreign currency) can also be classified as cash advances and incur similar fees and interest
Because of the high fees and immediate interest charges, cash advances are an expensive way to access cash and are generally recommended only for emergencies
